VAT refunds in the time of corona

After more than a year from the moment the virus was first detected in the Philippines, the COVID-19 pandemic has had a grueling effect on our society. It has introduced unprecedent challenges to the different aspects of our daily lives, such as, but not limited to public health, transportation, leisure, and livelihood.

To stop the transmission of the virus, the government has implemented varied types of community lockdowns and quarantine procedure, travel bans, and other similar measures. Consequently, such policies have disrupted the flow of activities for both the public and private sector, which includes among others the implementation of work from home arrangements to maintain productivity while limiting the mobility of people to mitigate the risk of transmission. This, in turn, drastically affected communication among co-workers and accessibility to important documents which are usually readily available in the office.

The pandemic brought about numerous inconveniences that we may inevitably have to live with for the next several years. Further, as taxation plays a great part in shaping the new normal, the inconveniences caused by the pandemic are also being addressed by the BIR through the implementation of measures that would somehow alleviate the burden of taxpayers. One of these measures is in connection with the filing of VAT refund applications.

The BIR recently issued Revenue Memorandum Order (RMO) 47-2020, which rationalizes the filing and processing of VAT refund claims, pursuant to Section 112 of the Tax Code. The objective of the issuance is to streamline the prescribed documentary requirements and procedures in order to effectively facilitate and expediate the processing of the claims.

Under the issuance, the total number of documents obtained from local sources that need to be certified by issuing agencies or persons has been substantially reduced. Apparently, as listed in the Revised Checklist of Mandatory Requirements on Claims for VAT Credit/Refund (Annex A.1) of RMO 47-2020, the BIR has allowed the submission of photocopies instead of requiring claimants to have certain documents  be duly certified/consularized by the other concerned government agencies. This would be beneficial for both the taxpayer claimant and the responsible agencies. For the taxpayer claimant, they could save on their time and resources since they would no longer have to go to different agencies if they already have a copy of the documents on hand. On the side of the agencies, they would increase productivity by being able to accommodate more people instead of processing superfluous requirements.

Further, one of the notable changes in the issuance is the consolidation of the sworn statements of the taxpayer claimant. Under Revenue Memorandum Circular (RMC) 47-2019, taxpayer claimants were previously required to submit four notarized sworn statements. Under RMO 47-2020, the taxpayer claimant needs to submit just one duly notarized taxpayer’s attestation containing the following:

• Taxpayer’s profile, books of accounts and accounting records.

• The amount of sales declared (with breakdown as to amount of zero-rated, taxable and exempt sales).

• Completeness and authenticity of the documents submitted.

• The ending inventory as of close of the period being claimed has been used directly/indirectly in the products exported, if applicable.

• The company did not file any and/or will not file any similar claim from another BIR office and/or the DOF-OSS (for claims with importation).

That the books of accounts and accounting records are available for verification by authorized BIR Revenue Officer(s) upon request and that failure on taxpayer claimant part to present said books and records is a ground for denial of our refund.

The issuance also introduced a significant change regarding the requirements for substantiating sales and purchases of goods and service. Under RMO 47-2020, the taxpayer claimant no longer has to submit photocopies of sales invoices or receipts for both purchases of goods and services. Instead, the taxpayer claimant availing of the VAT refund shall only be required to show the original copies of the said documents together with the corresponding scanned copies stored in a memory device (flash drive or memory stick). In line with this, the BIR examiner expects to receive two memory devices taxpayer claimant – one for the excel file of annexes, while the other is for the soft copies of sales invoices and receipts for both purchase of goods and services.

In this connection, the BIR also issued RMC 14-2021 to clarify as to which claims RMO 47-2020 shall apply to. In this regard, taxpayer claimants and revenue officials affected by the RMO shall observe the following in the filing and processing of VAT refund claims:

VAT refund claims filed prior to Jan. 19, 2021 shall be filed and processed following the guidelines and procedures set forth in RMC 47-2019 and RMO 25-2019.

VAT refund claims filed on or after Jan. 19, 2021 shall be filed and processed in accordance with the guidelines and procedures indicated on RMO No. 47-2020.

Many are grateful for the changes being implemented not only by the BIR but also other government agencies to, in one way or another, ease the impact of the COVID-19 pandemic. Hopefully, things will revert to normalcy in the near future, but already under a more efficient and functional regime of government service.

Jonnie May M. Ignalagin is an associate from the tax group of KPMG R.G. Manabat & Co. (KPMG RGM&Co.), the Philippine member firm of KPMG International. KPMG RGM&Co. has been recognized as a Tier 1 tax practice and Tier 1 transfer pricing practice by the International Tax Review.

This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity.

The views and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG International or KPMG RGM&Co. For comments or inquiries, please email [email protected] or [email protected].